Apple has always been known as a hardware company, and it still is, but services are more important to its strategy and bottom line than ever before. That point was driven home not just by the most recent Apple earnings report—in which CEO Tim Cook identified services as a division ripe for a doubling of revenue by 2020—but also by a talk by Apple SVP Eddy Cue at SXSW this week.
Interviewed by CNN’s Dylan Byers, Cue talked about Apple News, the tensions between open and closed platforms, and the company's TV and video strategy. Many of the statements he made seemed carefully crafted to distinguish Apple from other tech giants that have been the subjects of criticism in recent months.
Cue heads Apple's software and services efforts, and he took the stage in Austin moments after Apple announced it would acquire Texture, a magazine distribution app that has been repeatedly called the "Netflix of magazines" by numerous press outlets.
Texture only has a few hundred thousand subscribers at last report. But Apple Music—born out of the Beats acquisition and iTunes—has reached 38 million subscribers, with two million added just last month. Cue also said that eight million people are currently participating in the three-month free trial Apple offers of the service. Chief competitor Spotify had 70 million as of January.
Apple's services are growing, but what does the company have planned? Cue offered some insights.
Doing TV like Pixar does movies
With regards to the TV strategy, Cue said "we're not after quantity; we're after quality," as Apple's team of 40 or so, led by former Sony execs, works to strategically spend more than $1 billion on original programming. Cue compared the company's approach to that of Pixar (another company with close ties to Steve Jobs).
Meanwhile, Netflix is employing a strategy that increasingly looks like throwing everything it can grab at the wall of user taste and seeing what sticks—though some of what sticks is quite good. Netflix is reportedly spending as great as six times as much on original content as what Apple plans to spend in 2018.
We still don't know exactly where Apple's TV efforts will fit into its services, though. Will they be offered as part of Apple Music or another service altogether? If the former, will Apple Music be rebranded? Cue didn't speak about any of that. However, he did say that Apple has no plans to buy either Netflix or Disney, specifying that the company prefers to focus on acquisitions of companies, products, and technologies that will be key in the future, not on expensive acquisitions of companies that are already well established.
Apparently, Beats was an exception. The Guardian reported not long before the acquisition that Beats headphones accounted for about 64 percent of all headphones sold at prices above $100 in the United States.
“A lot of the issues going around”
The topic of the session was "Curation in Media"—a subject that seems relevant given the Texture acquisition. As such, Cue also discussed Apple News, and again, he was careful to differentiate Apple's philosophy from those of Google or Facebook. When asked about competitors' strategies, Cue chose words that were polite and restrained while still carrying a critical subtext, saying, "it's always hard to sit from the outside and talk about others" and "when you have a large platform, there's a lot of responsibility."
Of Apple News, he said, "We want the best articles, we want them to look amazing, and we want them to be from trusted sources... so we don't have a lot of the issues going around." Cue is likely alluding to a whole host of challenges Google and Facebook have recently faced, from unverified news reports appearing in users' feeds and search results to bots and algorithmically-driven echo chambers.
That fits well with his choice of words in the Texture acquisition announcement: "We are committed to quality journalism from trusted sources."
CNN's Byers asked Cue about his thoughts on the open platform philosophy espoused by Google and Facebook. Cue pointed to iTunes—specifically podcasts—as an example of Apple leading the way on curation efforts, seeking a middle ground. Advocates of open platforms often talk of democratization, but they also bring up concerns about free speech with regards to closely curated, closed platforms. This is sometimes framed in contrast to activists who have pressed Twitter and other companies to clamp down on hate speech.
"Hate speech is not free speech," Cue said. He added that nobody is completely free: "There are no pornography on these sites. So people do draw lines on these sites. We do think free speech is very important, but we don't think white supremacy or hate speech is important speech to be out there."
Byers took a leap to press further by noting that the NRA has an app on Apple's App Store. Cue responded by explaining that the NRA app does not violate Apple's publicly available policies for app submissions, that there are pro-gun control apps, too, and that you can't buy guns through apps on the App Store.
All of these statements painted a consistent picture: the leadership at Apple believes the company will close the flood gates and curate better video and better journalism, while other tech companies struggle with the challenges and contradictions deeply inherent in the ideals of the open Web. Apple has long sought to offer alternatives to the open Web for a variety of reasons, and as its focus on services grows over the next two years, that will still be the philosophy.
This moment makes sense to drive that point home. Even Tim Berners-Lee, who is often credited as one of the founders of the World Wide Web, published an op-ed this week arguing that the dream of the open Web is already compromised by gatekeepers like Facebook and Google, even as he remains committed to "making sure the Web is a free, open, creative space—for everyone."
It seems Cue is tapping into the current discussions and climate to differentiate Apple from its besieged competitors, at least when it comes to public opinion.